090913 Economics with Emphasis on the Free Enterprise System
and Its Benefits
Understanding CBE/EA requirements
Before you take the Economics with Emphasis on the Free Enterprise System and Its Benefits
(ECO FE) Credit by Examination/Examination for Acceleration from The University of Texas
K-16 Education Center, here are some things you need to know. You have sixty days from the
date of registration to take the exam.
Successfully completing the exam will earn you one-half unit of high school credit for the
course. This review sheet can help you prepare for the exam, by giving you an idea of what you
need to study, review, and learn. To succeed, you should be thoroughly familiar with the subject
matter before you attempt to take the exam.
Please note that exams and review sheets are updated regularly. When you take the exam, you
need to bring your confirmation letter, because it contains the unique number that indicates
which edition of the exam you will take. Your grade will be available two to three weeks after
you take the exam.
When you take the exam, please be prepared to show your competence and understanding of the
Texas Essential Knowledge and Skills (TEKS) that the Texas Education Agency has specified
for the course. Because this CBE/EA review sheet may not refer to all the material that will be in
the exam, you should use the complete TEKS for ECO FE to guide your exam preparation. You
can view these TEKS online at http://www.tea.state.tx.us/index2.aspx?id=6148
Preparing for the exam
The exam covers general economic systems and how they work.
To review this material, you may use any Texas state-adopted textbook for ECO FE. The exam
does not refer to any particular text, but it requires that you know the important concepts and
objectives covered in the course, as outlined by the TEKS.
If you wish, you may prepare for the exam with Economics: Principles and Practices, Texas
Edition, by Gary E. Clayton (Peoria, Illinois: Glencoe/McGraw-Hill, 1995), the Texas stateadopted textbook.
Concepts and objectives
As you prepare for the exam, please keep in mind that you will be asked to show mastery of the
following concepts and objectives:
• the mixed market system of the United States
• the role of the government in the marketplace
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ECO FE
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• the American economic system and international relations
• consumer economics
Time for the exam
You will be allowed 3 hours to take the exam.
Types of questions
50 multiple-choice questions (1 point each)
10 short-answer questions (5 points each)
50%
50%
Total 100%
Sample exam
Be sure to take the sample exam, for a better idea of the types of questions you will find on the
exam.
To prepare for these short-answer questions, write the answers to the fourteen questions below.
Ten of them will be on your exam. We have supplied key words and phrases to use in your
answer, and the page references from the Texas state-adopted text (see above).
Short-Answer Questions
1. Why do we say that economics is a social science, not an exact science? (p. 11)
(Suggested key words/phrases to use in your answer: unpredictable, based on choice,
deals with scarcity, no definite formulas, same combination/different results, deals
with people, etc.)
2. Why doesn’t Congress just pass a law to raise the minimum wage to a decent level? (p.
41, p. 202)
(Suggested key words/phrases to use in your answer: define decent, may cost others a
job, may drive up prices, fairness, too many teens in the workforce, etc.)
3. What is the difference between a money market mutual fund and an individual retirement
account? (pp. 326–352)
(Suggested key words/phrases to use in your answer: small investors get high interest
for big risk in mutual fund, money market mutual fund is not covered by FDIC, IRA
is tax-sheltered, safer investment, and will be taxed later, etc.)
4. What is the difference between supply-side and demand-side economics? (pp. 427–432
and fig. 17.7, p. 430)
(Suggested key words/phrases to use in your answer:
supply-side: stimulates production, cuts government regulations, cuts taxes, lets
business grow.
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demand-side: stimulates consumption, cuts taxes or increases federal spending,
businesses follow demand with more production, etc.)
5. What are some advantages and disadvantages of communism as an economic system?
(pp. 474–475)
(Suggested key words/phrases to use in your answer: job security, public services,
selfless society, no individual freedom, no incentive to work, low productivity, etc.)
6. If you were the owner of a sole proprietorship, what would be better about running your
business as a partnership rather than a corporation?
(pp. 54–61)
(Suggested key words/phrases to use in your answer: more capital, spread the
responsibility, unlimited life, etc.)
7. Explain briefly the Law of Demand (p. 86) and the Law of Supply (p. 106).
(Suggested key words/phrases to use in your answer: relationship to price, higher
price means more supply, lower price means more demand, etc.)
8. Why do we say that the individual income tax is progressive? (p. 216)
(Suggested key words/phrases to use in your answer: tax rate rises with income, tax is
flat up to a certain level, etc.)
9. What are at least two reasons for the inequality of pay between men and women? (p. 200)
(Suggested key words/phrases to use in your answer: uneven distribution, choice of
occupation, childbearing, etc.)
10. Why do we exchange money instead of bartering for goods and services? (p. 266)
(Suggested key words/phrases to use in your answer: store of value, measure of value,
medium of exchange, etc.)
11. Why would the negative income tax be a reasonable alternative to existing welfare
programs? (p. 412)
(Suggested key words/phrases to use in your answer: incentive to work, marketbased, etc.)
12. How are tariffs and quotas used to restrict free trade? (pp. 453–454)
(Key words/phrases to use: protection, limits, competition, domestic, foreign, etc.)
13. How can the United States economy benefit or be hurt by the North American Free Trade
Agreement (NAFTA)? (p. 459)
(Suggested key words/phrases to use in your answer: liberalize, protect jobs,
displaced workers, etc.)
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14. When the Federal Reserve System raises or lowers interest rates to shrink or enlarge the
money supply, why does that stimulate or slow down the economy? (pp. 309–311)
(Suggested key words/phrases to use in your answer: price levels, politics, inflation,
etc.)
Multiple-Choice Questions
Each of the terms listed below will be involved in some way as part of a multiple-choice item on
the exam. You should know the basic meaning of each term and its relationship to economics.
Use the index of Economics: Principles and Practices, Texas Edition, by Gary E. Clayton
(Peoria, Illinois: Glencoe/McGraw-Hill, 1995) (p. 607) to help you find the pages where these
terms appear in the text. You may also use a dictionary to locate these definitions.
• scarcity
• boycott
• entrepreneurship
• glass ceiling
• command economy
• benefit principle
• market economy
• proportional tax
• trade-off
• progressive tax
• production-possibility frontier
• regressive tax
• opportunity cost
• tax return
• capital
• revenue tariff
• factors of production
• balanced budget amendment
• factor market
• deficit spending
• product market
• Gross Domestic Product
• voluntary exchange
• barter economy
• profit motive
• run on the bank
• sole proprietorship
• Federal Deposit Insurance
Corporation (FDIC)
• partnership
• savings and loan crisis of 1980s
• corporation
• Federal Reserve System
• nonprofit organization
• inflation
• law of supply and demand
• deflation
• substitute input
• bill consolidation loan
• demand curve
• pension
• supply curve
• New York Stock Exchange
• diminishing returns
• mutual fund
• rationing
• Consumer Price Index
• depreciation
• Output-Expenditure Model
• monopoly
• John Maynard Keynes
• oligopoly
• market basket
• collusion
• decennial census
• price floor
• demographer
• public goods
• baby boomers
• union shop
• life expectancy
• closed shop
• standard of living
• collective bargaining
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tax base
affirmative action
Walter E. Williams
depression
the Great Depression
unemployed
unemployment
negative income tax
stagflation
supply-side economics
demand-side economics
monetary policy
fiscal policy
Bill Gates
tariffs
quotas
capitalism
socialism
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communism
Karl Marx
Lenin
Stalin
Mikhail Gorbachev
privatization
zero population growth
expropriation
cartel
OPEC
population density
subsistence
oil embargo
aquifer
Environmental Protection Agency
pollution permits
nonrenewable resources
Bringing identification and materials for the exam
Required photo identification Students must present an official ID (driver's license, school ID, an ID from the Department of
Public Safety, or passport) with photo and signature.
For more information about acceptable forms of identification, you may call the K-16 Education
Center Testing Center at 512-232-5000 or 1-888-232-4723.
Authorized materials for the exam You will be provided with additional paper if you need it. You will not be allowed to bring any
other items into the exam area.
Meeting requirements for taking the exam
Required score (CBE) If you have had previous instruction in the grade or course and are testing to complete
requirements and gain credit, you must score a minimum of 70%.
Required score (EA) If you are taking the Examination for Acceleration (skipping a grade or a required course), you
must score at least 90% to earn credit in the state of Texas.
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ECO FE
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Refund policy The $45 fee for the Credit by Examination or Examination for Acceleration is not refundable or
transferable to another person or another subject.
Test proctor and location You are responsible for arranging a testing time, in advance, with the counselor or test supervisor
in your school or alternate test site.
If you plan to test in the K-16 Education Center at The University of Texas at Austin, please
register for your exam at least 24 hours in advance of your desired testing date. Schedule your
exam so that you will have plenty of time to take the test in one sitting.
The times for sitting are listed at the Testing link of the K-16 Education Center's Credit by
Examination/Examination for Acceleration web link.
Saturday testing is available once a month, by appointment only. Please call 512-232-5000 or
1-888-232-4723 to schedule an appointment for a Saturday testing session.
Obtaining grades by phone In compliance with the Family Education Rights and Privacy Act (FERPA), no information will
be released over the telephone without your assigned Personal Identification Number. You will
find this PIN on your enrollment receipt.
Re-­‐examination If you score less than the minimum of 90% required to pass an Examination for Acceleration, a
re-examination is available for a $45 fee. Re-examination will be administered only after you
have received an official notification that the first exam score was below 90%.
If you score less than the minimum of 70% required to pass a Credit by Examination, a
re-examination is available for a $45 fee. Re-examination will be administered only after you
have received an official notification that the first exam score was below 70%.
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